Globalisation can be defined as either a social, economic or political phenomena.
In Business and management and economics, it is the ability of corporations to entered international markets without encountering legal restrictions. This ability allows for corporations to engage in trade and production in multiple economies that are outside of its own borders.
Globalisation as mentioned can also be a social phenomena. Take hip hop music as a example.
This art form is present in cultures are diverse as East Africa, where it is known as Bong-flava,Germany, Iran, France,Italy and as far away as China. Its roots are originally in the USA among the African-American Population. The influence of rap Music has led to a subculture that involves clothes and language that are similar in all the above countries mentioned and many more. Hip Hop is truly a Globalisation phenomena.
Politically, Globalisation has taken the form of countries engaging with each other in an attempt to foster greater cooperation and engagement. The organization of countries into trading blocs as we shall later examine is referred to as Preferential Trading Blocs.
What other forms of Globalisation have you seen. Movies? Television programs? Food? Sports?
Multinational companies
When a company has production facilities in more that one country, it can be referred to as a multinational corporation. These often, large industries take advantage of conditions in the host country in order to produce their goods or services at cost-advantage and thereby realize greater profits.
Discuss reasons for the growth of multinational companies.
We have identified in earlier chapters that the primary goals of companies include survival and profit maximization. In order to for a corporation to compete more effectively it finds that it is in its best interest to seek out the lowest and most efficient factor input costs as they relate to production. These cost advantages have propelled the dynamic growth or multinationals as they achieve economies and scale and external growth in new markets.
What becomes also interesting is that companies in the same competitive markets that do not pursue the same strategies may found themselves out-competed in their own domestic market. Therefore they too in turn may be compelled to adopt the same off-shoring strategy.
Production in more than one country also allows multinational corporations to penetrate and grow their business in other geographic locations. The ability to maximize the advantages of being in different legal, currency or tax economies has its potential advantages that can serve the interests of corporate objectives.
Analyse the role played by multinationals in the global business environment.
When a corporation such as Unilever with total revenue exceeding 59 Billion dollars in 2009, flexes its corporate muscle, it can become a fierce competitor in the global business environment. However, opportunities also exist for cooperation in what is a very large market that is mostly untapped. As we previously read, Joint Ventures and Mergers or Acquisitions can be largely exploited to allow two corporations the chance of utilizing the others skill sets.
Multinational corporations have grown rapidly and companies such as Coca-Cola, Nokia, Microsoft, McDonalds, Yum Brands (KFC and Pizza Hut), Ford, BMW and GM are a few of the many that have entered this global business environment. When businesses such as Coca-Cola develop close relationships with other companies worldwide, they by consequence enjoy strategic advantages through the ability to design, market or produce together in realizing common goals.
Evaluate the impact of multinational companies on the host country.
When a corporation makes the strategic decision to enter into production in a country other than its own, it is seeking to benefit from conditions or markets that serve primary vision or goals. These may indeed bring great benefits to the host economy in the form of Tax revenues for the government, local employment opportunities and training for workers and more consumer satisfaction in the form of increased products and services.
On the whole, it is self evident that multinational corporations have brought many benefits to communities who would otherwise not have as rapidly realized the same elevation in standards of living. Although these benefits and costs to society must be measured on a case be case basis, the question becomes whether the corporations and the impact on society can be qualified as sustainable development.
The case-by-case approach will reveal that some corporations are able to escape protectionist policies, produce willfully under less enforced regulatory standards and influence government policies and laws to their advantage. As mentioned in previous chapters, heavy criticism has been leveled at the Union Carbide Company and the disaster in Bhopal India.
Social and environmentally conscious corporations have the financial and organizational ability to affect a positive outcome on the host countries.
Regional trading blocs
Explain the impact on business of a country that is a member of a regional economic group/bloc.
Regional trading blocs that operate under the principles of Preferential Trading Agreements, offer a unique opportunity for companies to benefit from the special conditions and agreements between governments. These include the elimination of trading barriers such as tariffs and other protectionist measures. Therefore the primary goal of trading blocs is to reduce the costs of transactions, increase effective government revenue control and reduce the complexity of trade.
There are different types of Preferential Trade Agreements that have come into existence. These are in the form of Free Trade Areas, Custom Unions, and Common Markets such as the European Union.
1. The Free Trade Area (FTA) is the simplest from of a Trading Bloc. In the FTA countries agree on the elimination or reduction of barriers to trade. However, each member of the FTA has its own trading policy with the rest of the world.
An Example is NAFTA which comprises, Mexico, Canada and the USA.
2. In the Custom Union, the same conditions apply as in the FTA where countries agree on the elimination or reduction of barriers to trade, however, they now agree on a common trading policy with the rest of the world.
An example of a Customs Union is SACU the South African Customs Union. 3. In the Common Market, the same conditions apply as in the Custom Union where countries agree on the elimination or reduction of barriers to trade and agree on a common trading policy with the rest of the world. In addition, they allow for the free movement of factors of production, such as labor and capital and eliminate borders.
In the trading blocs, companies have access to larger markets and benefit from the intergovernmental policies, which seek to encourage trade and production. In this respect the companies within the trading bloc have a competitive advantage over non-member companies who have to meet the higher costs of doing business. Reflection Point
Business Corporations have greatly benefited from the process of Globalization. MTV is one such company. Go to the Website MTV Sites and then MTV WorldWide. Try and determine how many countries MTV is in.
Consider the following ONE of the following two statements in the context of what you have read and post in the Discussion Tab some thoughts in 150 words or more. Respond to one other comment.
1) Globalization for business such as MTV poses particular challenges. or 2) Globalization for a business such as MTV is a tremendous advantage.
IB Corner
How might a business benefit from being in a trading bloc when taking into account
i) common currencies ii) market share iii) trade laws iv) transfer pricing
1.9 Globalization
Globalisation can be defined as either a social, economic or political phenomena.
In Business and management and economics, it is the ability of corporations to entered international markets without encountering legal restrictions. This ability allows for corporations to engage in trade and production in multiple economies that are outside of its own borders.
Globalisation as mentioned can also be a social phenomena. Take hip hop music as a example.
This art form is present in cultures are diverse as East Africa, where it is known as Bong-flava, Germany, Iran, France, Italy and as far away as China. Its roots are originally in the USA among the African-American Population. The influence of rap Music has led to a subculture that involves clothes and language that are similar in all the above countries mentioned and many more. Hip Hop is truly a Globalisation phenomena.
Politically, Globalisation has taken the form of countries engaging with each other in an attempt to foster greater cooperation and engagement. The organization of countries into trading blocs as we shall later examine is referred to as Preferential Trading Blocs.
What other forms of Globalisation have you seen. Movies? Television programs? Food? Sports?
Multinational companies
When a company has production facilities in more that one country, it can be referred to as a multinational corporation. These often, large industries take advantage of conditions in the host country in order to produce their goods or services at cost-advantage and thereby realize greater profits.
Discuss reasons for the growth of multinational companies.
We have identified in earlier chapters that the primary goals of companies include survival and profit maximization. In order to for a corporation to compete more effectively it finds that it is in its best interest to seek out the lowest and most efficient factor input costs as they relate to production. These cost advantages have propelled the dynamic growth or multinationals as they achieve economies and scale and external growth in new markets.
What becomes also interesting is that companies in the same competitive markets that do not pursue the same strategies may found themselves out-competed in their own domestic market. Therefore they too in turn may be compelled to adopt the same off-shoring strategy.
Production in more than one country also allows multinational corporations to penetrate and grow their business in other geographic locations. The ability to maximize the advantages of being in different legal, currency or tax economies has its potential advantages that can serve the interests of corporate objectives.
Analyse the role played by multinationals in the global business environment.
When a corporation such as Unilever with total revenue exceeding 59 Billion dollars in 2009, flexes its corporate muscle, it can become a fierce competitor in the global business environment. However, opportunities also exist for cooperation in what is a very large market that is mostly untapped. As we previously read, Joint Ventures and Mergers or Acquisitions can be largely exploited to allow two corporations the chance of utilizing the others skill sets.
Multinational corporations have grown rapidly and companies such as Coca-Cola, Nokia, Microsoft, McDonalds, Yum Brands (KFC and Pizza Hut), Ford, BMW and GM are a few of the many that have entered this global business environment. When businesses such as Coca-Cola develop close relationships with other companies worldwide, they by consequence enjoy strategic advantages through the ability to design, market or produce together in realizing common goals.
Evaluate the impact of multinational companies on the host country.
When a corporation makes the strategic decision to enter into production in a country other than its own, it is seeking to benefit from conditions or markets that serve primary vision or goals. These may indeed bring great benefits to the host economy in the form of Tax revenues for the government, local employment opportunities and training for workers and more consumer satisfaction in the form of increased products and services.
On the whole, it is self evident that multinational corporations have brought many benefits to communities who would otherwise not have as rapidly realized the same elevation in standards of living. Although these benefits and costs to society must be measured on a case be case basis, the question becomes whether the corporations and the impact on society can be qualified as sustainable development.
The case-by-case approach will reveal that some corporations are able to escape protectionist policies, produce willfully under less enforced regulatory standards and influence government policies and laws to their advantage. As mentioned in previous chapters, heavy criticism has been leveled at the Union Carbide Company and the disaster in Bhopal India.
Social and environmentally conscious corporations have the financial and organizational ability to affect a positive outcome on the host countries.
Regional trading blocs
Explain the impact on business of a country that is a member of a regional economic group/bloc.
Regional trading blocs that operate under the principles of Preferential Trading Agreements, offer a unique opportunity for companies to benefit from the special conditions and agreements between governments. These include the elimination of trading barriers such as tariffs and other protectionist measures. Therefore the primary goal of trading blocs is to reduce the costs of transactions, increase effective government revenue control and reduce the complexity of trade.
1. The Free Trade Area (FTA) is the simplest from of a Trading Bloc. In the FTA countries agree on the elimination or reduction of barriers to trade. However, each member of the FTA has its own trading policy with the rest of the world.
An Example is NAFTA which comprises, Mexico, Canada and the USA.
2. In the Custom Union, the same conditions apply as in the FTA where countries agree on the elimination or reduction of barriers to trade, however, they now agree on a common trading policy with the rest of the world.
An example of a Customs Union is SACU the South African Customs Union.
3. In the Common Market, the same conditions apply as in the Custom Union where countries agree on the elimination or reduction of barriers to trade and agree on a common trading policy with the rest of the world. In addition, they allow for the free movement of factors of production, such as labor and capital and eliminate borders.
In the trading blocs, companies have access to larger markets and benefit from the intergovernmental policies, which seek to encourage trade and production. In this respect the companies within the trading bloc have a competitive advantage over non-member companies who have to meet the higher costs of doing business.
Business Corporations have greatly benefited from the process of Globalization. MTV is one such company. Go to the Website MTV Sites and then MTV WorldWide. Try and determine how many countries MTV is in.
Consider the following ONE of the following two statements in the context of what you have read and post in the Discussion Tab some thoughts in 150 words or more. Respond to one other comment.
1) Globalization for business such as MTV poses particular challenges.
or
2) Globalization for a business such as MTV is a tremendous advantage.
How might a business benefit from being in a trading bloc when taking into account
i) common currencies
ii) market share
iii) trade laws
iv) transfer pricing